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Oil sands in full swing, JV approved Boards OK Nexen, OPTI deal; Israeli technology cuts costs Gary Park Petroleum News Calgary Correspondent
Joint venture partners Nexen and OPTI Canada climbed aboard the fast-moving oil sands bandwagon by giving final corporate approval to their C$3.4 billion Long Lake project in northeastern Alberta.
The boards indicated construction will start after September, with the first phase producing 72,000 barrels per day in 2006, yielding about 60,000 bpd of low-sulfur synthetic crude once an upgrader comes on stream in 2007. Volumes could double by 2011. Of the estimated 4 billion barrels in place at the Long Lake lease about 1 billion barrels is considered recoverable.
The project comes on the heels of regulatory approvals for Canadian Natural Resources’ C$8.5 billion Horizon project and the C$2 billion Jackpine project by Shell Canada, although both still need final board approval.
Long Lake will be the first to integrate steam-assisted gravity drainage with an onsite upgrader. It will employ new technologies developed by OPTI’s parent Ormat Industries, an Israeli power technology firm.
By eliminating the need to purchase natural gas and electricity, which are among the biggest costs of producing from the oil sands, the backers are targeting costs of C$5-$10 a barrel, well below the operating costs of projects that use mining techniques.
OPTI is taking on C$800 million in debt and raising C$965 million in equity in a financing that is unprecedented for a start-up resource company. Synthetic crude expected to triple The flurry of action is accompanied by a projection from FirstEnergy Capital that synthetic crude output will soar to 1.6 million bpd over the next decade from the current 500,000 bpd. Output delivered as raw bitumen will increase to 800,000 bpd from 350,000 bpd over the same period.
FirstEnergy said news of rising output has led to planned pipelines from Alberta to the U.S. West Coast, Kansas, Oklahoma and Kentucky.
Separate figures show output from oil sands mines rose by an average 50,000 bpd last year to 485,000 bpd, despite maintenance-related setbacks that trimmed production at the Syncrude Canada plant by almost 18,000 bpd.
The most positive offsetting contribution came from the Shell Canada-operated Athabasca project, which averaged 122,500 bpd for the second half and 61,250 bpd for the entire year, on its way to a peak 155,000 bpd. Syncrude averaged 212,000 bpd and dropped to 204,348 bpd in the final quarter from almost 249,000 bpd in the same period of 2002 because of an earlier-than-anticipated maintenance shutdown.
Suncor Energy posted an average 216,600 bpd in 2003, close to 11,000 bpd above 2002, including a strong second-half performance when it bettered 230,000 bpd, despite a nine-day maintenance shutdown at one of two hydrotreaters and an unplanned seven-day outage at one of two hydrogen plants. Meanwhile, Syncrude, the world’s largest producer of synthetic crude, seems destined for a shake-up under new Chairman and Chief Executive Officer Charles Ruigrok.Offering his views in Fort McMurray Today, he listed cost as “one of the biggest threats to growth in the oil sands industry.” Not surprising, given Syncrude’s less than stellar showing last year, with average costs per barrel soaring 20 percent in the final quarter to C$22.93 from C$14.73.
Ruigrok indicated he was equally unhappy with reliability at the giant operation, stemming from unanticipated maintenance.
On the upside, after three weeks meeting with employees, he saw a “lot of enthusiasm and a lot of commitment … to achieve our objectives” in production volumes and unit costs.
Ruigrok, on the Syncrude board for three years, was oil sands vice president at Imperial Oil, which owns 25 percent of the consortium.
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